In this issue, John Denslinger addresses the challenges facing the electronic component supply chain heading into 2025, then introduces the digital technologies here to help
Forecasting 2024 was quite a challenge. One had to accurately predict inflation’s impact on consumers, gage geo-political tensions and pray the reliability of refreshed supply chains were, in fact, reliable. Also, one had to weigh the heavy-hand of the government on key growth markets including EVs, green energy, domestic chip and battery production and electrification of society. It also required a watchful eye on the Federal Reserve. Could they orchestrate a soft landing or would the economy fall into recession?
In the post COVID era, many companies focused on resilience and agility over pure efficiency. Throughout 2024, supply chain managers introduced first generation digital tools, data analytics and automation. The timing was fortunate as new problems began to mount: (1) inflation that destabilized labor and material costs; (2) labor/skills shortages that limited supply expansion; (3) canal bottlenecks, port slowdowns and unprovoked vessel attacks that disrupted maritime transit; (4) environmental and sustainability pressure that impacted production and transportation of goods; and (5) cyber-attacks that threatened supply chain integrity and data.
Entering 2025, little has changed. The challenges are still there. Supply chains made remarkable progress in resilience and agility, but more is now expected. In 2025, supply chains will be pushed to recover previously sacrificed efficiency, integrate more flexibility, improve collaboration with suppliers and add start-to-finish visibility. To accomplish all this, digitalizing America’s supply chains becomes a vital undertaking. The roadmap isn’t difficult, but it will take a sustained resource commitment.
First, it starts with big data, cloud computing and advanced analytics. Together they raise decision-making to another level. With new diagnostic tools and predictive modeling, supply chain organizations can readily identify and eliminate inefficiencies. On the environmental side, there are positives as well. As developed economies move towards net-zero emissions, organizations gain unparalleled traceability and transparency across the entire supply chain. Imagine having visibility into suppliers, suppliers of suppliers and potentially back to the primary raw material sources.
Next is AI. AI improves logistics. According to McKinsey & Company, early adopters reduced logistical costs by 15 per cent and improved inventory levels by 35 per cent through better demand forecasting, optimized production and inventory planning. Other studies reported comparable results. AI proactively manages risks, from real-time cyber threats to ethical sourcing compliance.
Keep in mind though, digitalization merely upgrades capability. Skills optimize. According to the World Economic Forum’s Future of Jobs Report 2023, ‘technology literacy’ ranked third in skills most needed. The digital workforce of tomorrow will need competency in: advanced analytics and automation; cybersecurity; blockchain technology; IoT; data analytics; and soft skills such as collaboration and effective communications.
Next month, 2025 forecasts will be announced. Companies that continuously build towards optimized digital supply chains will be in the best position to succeed. What is the state of your supply chain entering 2025?